Let Huettner Appraisal Inc. help you learn if you can cancel your PMI

A 20% down payment is usually accepted when getting a mortgage. The lender's liability is often only the difference between the home value and the amount due on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and natural value variations on the chance that a borrower defaults.

The market was taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplemental policy takes care of the lender in the event a borrower defaults on the loan and the market price of the home is less than what the borrower still owes on the loan.

PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible. It's favorable for the lender because they secure the money, and they get the money if the borrower is unable to pay, unlike a piggyback loan where the lender consumes all the damages.

How can home owners refrain from bearing the cost of PMI?

The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law pledges that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent. So, wise home owners can get off the hook a little early.

Since it can take countless years to get to the point where the principal is only 20% of the original amount of the loan, it's necessary to know how your home has appreciated in value. After all, any appreciation you've accomplished over the years counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends indicate plunging home values, be aware that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home might have gained equity before things calmed down.

The toughest thing for many home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to know the market dynamics of our area. At Huettner Appraisal Inc., we're masters at identifying value trends in Cape Coral, Lee County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will most often do away with the PMI with little trouble. At which time, the home owner can relish the savings from that point on.

Want to learn more about PMI and the Homeowners Protection Act? Click this link:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year